The SpaceX IPO: insane valuation but will likely fly

The pending IPO of Elon Musk-controlled SpaceX (symbol SPCX) is grabbing all of the headlines at the moment, and for good reason – it is not only expected to be the largest IPO ever, but also the largest company (by market cap) to ever do an IPO.  The proposed offering is also unique in other ways.  For starters, the IPO marketing process is unconventional.  For example, the offer price per share – normally provided as a range once investor meetings are well underway – has already been provided, even though the formal marketing process has not commenced.  At the expected offer price of $135/share for 555.6 million shares, public investors will hold circa 4.2% of the company’s shares after the IPO, which is expected to price on June 11^th and begin trading on June 12^th.  Led by Goldman Sachs (lead left) and Morgan Stanley, the IPO is expected to raise $75 billion which – if things go as planned – would give the company a valuation of around $1.75 trillion.  At this valuation, SpaceX would be only one of 15 companies in the world with a market capitalisation over $1 trillion, and would be pro forma the 9th largest company in the world, just behind Saudi Aramco and ahead of Tesla.   

I have covered some of the more interesting attributes of SpaceX and the pending IPO in this article.  My view from an investor’s perspective is that the offering is wildly overvalued and has been hyped massively (and I must say successfully) by its infamous controlling shareholder Elon Musk, the lead banks on the IPO transaction, and of course the many investors that have bought shares in the company privately since its inception in 2002.  I think the stock will come strong and “pop” at the IPO, but will but struggle to hang on to its gains as a combination of reality sets in regarding the valuation and the expiry of the phased lock-up period begins to allow existing investors to sell shares. 

Even though I expect SPCX to get out of the blocks quickly, the aftermath might not be dissimilar to the trajectory of Facebook (now Meta) shares following its IPO in May 2012. Meta’s shares were priced at the IPO at $38/share but fell by more than half within four months.  Of course, keep in mind that META gradually clawed its way higher, finally increasing above its IPO price by the summer of the following year. And although META has had a volatile history, investors that were buy-and hold have made a killing, with the current price around $623/share. 

Why would investors want to participate in the SPCX IPO at the proposed crazy valuation?

Investors around the world are clamouring to get shares allocated to them in the SpaceX IPO. This is less about what the company might really be worth because it is clearly an aggressive (or I would say “ridiculous”) valuation, but rather – depending on the type of investor – other attributes of the offering.

• Institutional investors will want to own shares in SpaceX because the stock will immediately be listed on the NASDAQ.  More importantly though, through the NASDAQ “fast entry” rule (effective May 1^st 2026), SPCX will be included in the NASDAQ 100 index after 15 trading sessions.  This is highly unusual for newly-listed companies, but it has to be put in the context of the company’s expected valuation.  Passive index funds will haveto own the shares for obvious reasons, and most active managers will also probably want to own shares since they are generally measured against the benchmark indices in terms of assessing their performance.

• Select hedge funds and similar investors will want to be allocated shares at the IPO for the simple reason that demand for SpaceX shares is expected to be so strong that the stock will take off like a rocket in the secondary market.  These sorts of investors might pretend to be “buy & hold”, but many of them will certainly flip the shares immediately if they pop 20% or 30% in the secondary market.

• Retail investors might want shares to own SPCX for one of two reasons.  Firstly, they might think that Elon Musk “walks on water”, given he has successfully “pumped” Tesla (TSLA) to a ridiculous valuation level (price/sales at 15x, and forward P/E of 200x).  Mr Musk is viewed as one of the world’s foremost authorities on “new tech”, and it’s hard to argue with the success of many of the ventures with which he has been involved.  Unusually in this offering, up to 30% of the stock is expected to be allocated to retail investors, three times the norm (per Reuters).  Secondly, geeky retail investors (I would normally consider myself one of those) might simply want to own a public company that is involved in something as forward looking and cool as space travel.  It’s like owning Petrus is you’re a wine collector – it’s clearly nowhere near as good as the price suggests, but it is a unique and sought-after label. I would expect SPCX to have a similar appeal to many retail investors. 

What does the IPO prospectus say is the mission of SpaceX.

I have extracted the mission statement from the SPCX IPO prospectus below, which is – needless to say – very “Elon Musk like”!

That’s sexy, ambitious, and very forward-looking.  However, investors over many years and in multiple rounds of financing have been latching onto this mission, or something similar, since well before the IPO of the company was ever contemplated. 

What does SpaceX actually do?

SpaceX is in three segments according to the IPO prospectus:

• Space: As the name suggests, SpaceX is first and foremost focused on space travel.  Other well-known private companies also involved in space travel include Mr Bezo’s (founder AMZN) Blue Origin and Richard Branson’s Virgin Galactic.  However, it is clear based on my limited research that SpaceX is far larger and more ambitious, and more successful to date, than its peers.  Even so, SpaceX is losing money and is involved in the smallest addressable market (of the company’s three segments) going forward (circa $370 billion), rather odd given all the hype and enthusiasm around space travel. Having said that, SpaceX accounted for around 50% of all satellite launches globally in 2025, so it is clearly the dominant player in space. 

  
  

• Connectivity: SpaceX has been far more successful, at least from a profitability perspective, in the segment it refers to as “Connectivity”.  This includes Starlink, which has seen its customer base more than triple and its income from operations increase 10x since 2023.  The company currently has around 10,400 satellites orbiting the Earth (here).  This segment is clearly the cash flow engine (relatively speaking) at the moment, although the addressable market is $1.6 trillion, still smallish to me although it leaves considerable room for growth.  I like this business. 

  
  

• A.I.:  Perhaps not surprising, SpaceX is very much hanging its hat and insane valuation on the future growth of A.I., specifically the massive, expected growth in data centres going forward.  With an addressable market estimated to be $26.5 trillion, the opportunity for growth in A.I. far exceeds the opportunity in both space travel and connectivity, in spite of the company being viewed primarily by many as a space company.   However, A.I. is the clear cash flow drain at the moment, with the company losing almost $7 billion (loss from operations) in this segment in 2025.  Moreover, circa 60% of capital expenditures (of total $20 billion) in 2025 was focused on A.I.  This is a serious punt, but it is aligned with the crazy valuations that seem to surround anything and everything related to A.I. at the moment.

I thought the commentary and table below from the prospectus provided a nice summary of the addressable market for each of the three segments above, suggesting that the real opportunity is not surprisingly in A.I.

Financial performance

You can find the summary financial statements in the SPCX S-1 here, on pp 21-23. It is rather shocking to know that a company that is so indebted and is losing so much money will be valued around $1.75 trillion.  In case you don’t want to look at the details, SPCX had revenues of $18.7 billion in 2025 and $4.7 billion in the first three months of 2026.  In the same periods, the company has a bottom-line loss of $4.9 billion in 2025 and a bottom-line loss of $4.3 billion in the first three months of 2026.  The first quarter of this year does not seem particularly inspiring to me, but you be the judge.

Governance issues: dual class stock structure and lock-up provisions

SPCX will have a dual-class stock structure, effectively ensuring that Mr Musk continues to control the company through his ownership of super-voting shares.  Based on what I have read, Mr Musk will own 42% of the company after the IPO, but will control 79% of the voting shares due to this undesirable dual-class stock structure.  META has as similar dual-class structure in which Mr Zuckerberg holds voting control, and it arguably has not hurt the performance of the company (predecessor Facebook) since the company went public in 2012.  But it does mean that should the SpaceX falter, investors will be subject solely to Mr Musk’s whims and strategy, with the inability to replace him.  A recent Morningstar report (here) discusses this issue along with numerous conflicts of interest involving Mr Musk, all of which are deemed “shareholder unfriendly”.  In a nutshell, the company is fraught with governance issues that investors might moan about but typically look the other way.

The other shareholder matter worth thinking about involves the lock-ups.  Lock-ups control when existing investors can sell shares after the IPO, which adds to supply and can put pressure on the price.  Note that the IPO is raising proceeds only for the company, and includes no existing shareholders.  The typical lock-up period for an IPO is 180 days, a period in which no existing shareholders can sell shares.  However, in the case of SpaceX, the lock-ups will be phased out over periods of time that are shorter than 180 days, creating a potential overhang in the share price.  The lock-up schedule for SpaceX is in the table below from #Bloomberg. 

My understanding is that Elon Musk will not be able to sell shares for at least one year after the IPO.

Existing investors in SpaceX

The largest investors in SpaceX today include Legendary Investors, Fidelity Investments (Contrafund apparently the largest holder at Fidelity), Andreessen Horowitz, Mirae Asset, Google, Founders Fund (Peter Thiel), Sequoi Capital, Valor Equity Partners, Bank of America, Baillie Gifford, and Ontario Teacher’s Pension Plan, among others.  You can find more about the investors and the various funding rounds of SpaceX since its inception in 2002 on the website Websets.

And two final things….

• Risk factors in the S-1 make for fun reading:  Before you get too pumped up on this IPO, you can take a quick look of the risk factors in the S-1 which are conveniently summarised on pp. 15-16.  And if you want to really dig in (which I did not), the full “Risk Factors” section is covered in 37 pages (gulp!) starting on page p. 26 of the IPO document.  Rest assured that reading this section won’t exactly lift you up, although it might put you to sleep. Simply stated, SpaceX is highly speculative in many respects, and there is ample warning there for investors across a variety of fronts.  Of course, it is important to remember that the “Risk Factors” section of any public offering document never exactly lifts you up.  

• And don’t forget the X (formerly Twitter) legacy:  It’s hard to forget how Elon Musk wildly overpaid for Twitter in a take-private transaction that closed in October 2022.  From nearly the time the offer was announced in April 2022 until it closed, Mr Musk tried to wiggle out, quickly recognising that he was massively overpaying for the company.  Try as he may, he could not find an escape hatch and ultimately had to close the $44 billion acquisition, which included a large amount of bank debt.  Shortly thereafter, the company announced mass layoffs and was rebranded as X. Over the ensuing years, X became known best as a rather controversial right-leaning social media platform.  The company’s revenues fell by half (due to loss of advertisers) over three years.  With the valuation of X significantly lower than what Mr Musk paid for the company, he decided to merge X with another company he controlled xAI (owner of Grok chatbot), in March 2025.  The transaction valued xAI at $80 billion and X (including debt, so EV) at $33 billion.  (I am not going to delve into details here, but the merger gave the creditors of X a lifeline.)  Then around one year later (in February 2026), Musk-controlled SpaceX acquired the xAI in a transaction that valued SpaceX at $1 trillion and xAI at $250 billion.  This series of business combinations involving Musk-controlled companies raises speculation that eventually Tesla might be acquired by SpaceX. Apparently, such a merger is being discussed, noting that the companies already have some commercial arrangements and share some infrastructure.  Mr Musk has shown he is not shy about mashing together his companies to protect value.

The valuation

I have no idea what SPCX is worth, but I can’t imagine it’s worth anywhere near $1.75 trillion given its financial performance, governance issues, and aspirational business plan.  But it doesn’t matter, because I suspect investors will be all over this with virtually no regard to what the company might really be worth.  I find this all a bit too much for my taste.  For an independent and more professional view, #Morningstar has put a valuation on the company of $780 billion, less than half of what the company’s value is expected to fetch at the IPO in a few days.

If you want a private market benchmark though, it is interesting that on May 15^th ahead of the IPO, SpaceX did a 5-for-1 stock split, adjusting its pre-split valuation of approximately $526.59/share to $105.32/share.  At the proposed IPO price of $135/share, this would deliver paper gains to existing (private) investors of 28.2% in less than one month.  That’s not bad at all for a money-losing aspirational company!

Where can I read more about SpaceX?

The SpaceX S-1 (IPO) document is here. Also, if you can assess it, this recent report from #Morningstar (“SpaceX: What Investors Need to Know About Its Enormous Upcoming IPO”) is very informative.

Conclusion

My expectation is that the shares will pop in the immediate secondary market, but will close the year at a price that is below the IPO price once the shine comes off.  That is, unless Mr Musk can apply his “Tesla-like” touch by somehow convincing investors that the stock is worth well more than any rationale investor would say represents fair value.  Mr Musk is the master of this, so it cannot be dismissed in spite of what I believe are over-hyped and rather poor economics of this offering.